And yet, our federal government could still choose to impose stricter privacy policies. In the new FTC report, the agency calls upon Congress to consider legislating that all ad serving companies cooperate with its own “Do Not Track” system. In contrast to the self-imposed privacy practices by the advertising industry, federal law could require that every time an ad is served, additional information about the ad would pop up on the user’s screen (e.g. what company is serving the ad, why they’re serving it, what information they are collecting.) The consumer would then be asked to grant the advertiser permission to continue serving her the ad and collecting anonymous information about her online activity. Justifiably, the ad industry – including large brands, agencies and the tech companies that serve them – is very concerned about the potential for widespread “opt out,” never mind irritation from consumers, if this type of regulation were to be implemented in the extreme.

Make no mistake: if stringent policies go into place that inhibit the growth of companies that rely on online advertising, there will be negative repercussions for both the ad industry and, by extension, for the broader economy. The online advertising industry - startups and larger companies alike - has been one of the few bright spots in our sluggish economy over the past few years. To this point, a recent Harvard study commissioned by the IAB found that interactive advertising currently accounts for $300 billion of economic activity in the U.S, and that 3.1 million Americans are employed by a company within the online advertising ecosystem.

And yet, while concern throughout the ad industry is very understandable, it may be our Internet startups and new incubating businesses that stand to lose the most if the government mandates more severe online tracking restrictions.

What Do Internet Startups Stand to Lose?

First, one must remember that advertising is one of the leading revenue generators for digital startups. A few examples include small online publishers and social networks. More to the point, “targeted” advertising - which utilizes anonymous cookie data collected from users in order to deliver relevant ads and an overall tailored Web experience - is the predominant form of online advertising employed by most of these companies.

And, if these companies were prevented from serving targeted ads, the revenue they’re deriving from advertising would be largely eliminated. Look no further than “across the pond” for a peek into what could be a devastating future for many U.S.-based Internet startups. According to a 2011 study by researchers at MIT and the University of Toronto, there was a 65 percent drop in ad effectiveness after European countries instituted strict data collection rules for targeted ads.

The irony, of course, is that many of these startups, out of desperation, would continue to serve ads. But, instead of offering pertinent ads, we might find ourselves going back at least ten years to a time when flashing monkey display ads littered our screens, begging for our attention, with the ridiculous hope that we might actually feel compelled to click on them. Because there would be no intelligence behind these systems to understand the relevancy of each ad, most of the online ad models that startups utilize today would be rendered useless overnight. Websites would be littered with totally useless and awkward advertising.